Washington, D.C. – June 18, 2013 – Retailers and consumer packaged goods (CPG) companies today are dealing with new rules of consumer engagement as they seize opportunities from advanced technology and the digitally connected consumer, according to the 2013 Financial Performance Report by the Grocery Manufacturers Association (GMA) and PwC US, titled Growth Strategies: Unlocking the Power of the Consumer. Despite the overall slowing of net sales growth rates in 2012, the report notes that food, beverage and household products companies experienced positive net sales growth of 7.0 percent, 5.5 percent and 3.2 percent, respectively.

According to the report, in the age of the digital consumer, leading consumer packaged goods (CPG) companies and retailers benefit from responding to the speed of the connected consumer and balancing operational quality with innovation accordingly. Top-performing companies see success by identifying their consumers, engaging with them and focusing on innovation that directly reach their customers. The report explores how numerous digital channels, accelerated mobile adoption and direct-to-consumer approach are rewriting the rules of retailing and CPG manufacturing. The report also examines how companies can seize new opportunities by creating lasting brand value.

“This report shows that in the midst of a challenging economy, the food, beverage and consumer products industry continues to show great resiliency,” said Pamela G. Bailey, president and CEO of the Grocery Manufacturers Association. “By providing consumers with innovative products and convenient, cutting-edge shopping experiences, CPG companies are well positioned to enhance consumer loyalty and profitability.”

“CPG companies that engage with consumers directly through digital channels and build out their direct-to-consumer processes will have the best advantage for creating new growth,” said Steven Barr, PwC’s US leader, retail and consumer industry. “Fifty-two percent of U.S. consumers are already buying directly online from brands they trust, proving that CPG companies now have far greater opportunities to walk alongside their shoppers in real time while driving sales of existing and new products.”

In 2013, more than 40 percent of CPG companies expect to sell products directly to consumers, up from 24 percent in 2012. According to the report, direct-to-consumer is a potent vehicle for testing new products and reaching out to new consumers faster and more effectively than ever before, making the retail store aisle no longer the last mile in the purchase journey. Flexibility will be essential, as companies will also need to manage a new set of risks and security concerns.

“Consumers today share much more readily with each other and with the companies than in the past,” says Bert Alfonso, President, International, for The Hershey Company. “Their input tends to be about your product’s characteristics and about what they like and don’t like. We see it in North America, China, Brazil, and in other markets that have a high penetration of both mobile and Internet usage. And that’s a rich body of information for companies, which is much more spontaneous and actionable than what you would have had in the past.”

“Both the U.S. and global economies are marginally stronger than they were last year, and the continued slow recovery has led to correspondingly modest growth for the CPG industry,” added Lisa Feigen Dugal, PwC’s North American advisory leader, retail and consumer industry. “To drive profitability, providing consumers with the core product may not be enough. Today’s consumers want solutions, they want experiences and value. CPG’s and retailers can address this emergence through social media, innovation and direct-to-consumer channels, which will help them understand the wants, needs and values of their consumers.”

Now in its 17th year, the GMA-PwC Financial Performance Report includes analyses based on public information from 144 companies in the food, beverage and consumer products sectors as well as 69 retailers.

Among the key findings of the report:

Total retail sales reached $1.1 trillion in 2012: $568 billion at grocery stores and $530 billion at food service and drinking establishments.

While net sales had been slowly going up since the recession, both top- and bottom-performing CPG companies experienced a slowdown in net sales growth in 2012.

Bottom performers are starting to hold onto their cash, which means they could be ready to start making more investments in research and development (R&D) and marketing to launch new products.

Many companies are embracing the need for product innovation as well as understanding consumer and market needs as part of their R&D activities.

One of the key issues faced by food manufacturers during 2012 was the continued rise of commodity prices as there is a growing gap between prices companies pay for raw materials and the prices they can charge for finished goods.

The food sector benefited from higher sales per employee while remaining flat on inventory turnover and cash conversion cycle, while the beverage sector also posted a strong performance, with return on sales continuing a steady upward pace. The household products sector experienced better results in 2012, with also a greater increase on return on sales.

The report further delves into how companies can gain greater understanding of their customers, as it highlights best-practices for developing loyalists, determining appropriate social media channels that align with business goals, along with successfully identifying target segments within their organization. The report includes recommendations on how companies can improve existing internal organizational design, talent management and how to best utilize partnerships to build quality relationships with consumers.

About the Grocery Manufacturers AssociationBased in Washington, D.C., the Grocery Manufacturers Association is the voice of more than 300 leading food, beverage and consumer product companies that sustain and enhance the quality of life for hundreds of millions of people in the United States and around the globe.

Founded in 1908, GMA is an active, vocal advocate for its member companies and a trusted source of information about the industry and the products consumers rely on and enjoy every day. The association and its member companies are committed to meeting the needs of consumers through product innovation, responsible business practices and effective public policy solutions developed through a genuine partnership with policymakers and other stakeholders.

In keeping with its founding principles, GMA helps its members produce safe products through a strong and ongoing commitment to scientific research, testing and evaluation and to providing consumers with the products, tools and information they need to achieve a healthy diet and an active lifestyle.

The food, beverage and consumer packaged goods industry in the United States generates sales of $2.1 trillion annually, employs 14 million workers and contributes $1 trillion in added value to the economy every year. For more information, visit the GMA Web site at www.gmaonline.org.

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